Uncommon Interview: Balsamiq Studios

I hate most interviews, and I think everyone else does too. They’re rarely actionable or insightful. You want to learn and get specific ideas from interesting, thoughtful people, not read a biography.

This interview is different.

I’m starting the Uncommon Interview: Five questions that solicit deep answers with actionable advice, examples, and insight. Answers in paragraphs, not one-liners. Depth, not breadth. (Leave a comment and tell me if you want more of these.)

Let’s get started.

Peldi got 100 product reviews in the first six weeks after product launch and raked in $800,000 in the first 12 months of operation. That should get your attention!

Q: You’ve been impressively — some would say frighteningly — transparent on your website and blog about being a tiny company. Obviously this works well for you, yet still most small companies persist in promoting the façade of being ten times larger than they are. Would you suggest that most people should follow in your footsteps or is this a cultural decision that isn’t vital to success? How do you decide what is “OK to reveal” and how much is “too much?” (For example, you used to publish all revenue figures but recently you stopped that practice.)

First of all I’d like to thank you Jason for the great work you’re doing with this blog, it’s part of my “read every single word, twice” folder in Google Reader, so it’s really an honor to be featured here.

Regarding transparency: in short, I am trying to build a company I would like to do business with as a consumer. Being transparent is how I’m trying to gain my customers’ trust and respect.

Thousands of years of evolution have made humans great BS detectors, so why do people even try to be something they’re not? If something smells fishy on a company’s website, would you buy their products? As a vendor, do you really want to only have the customers you have fooled into buying from you? It sets off the vendor/customer relationship on a bad note right from the start.

I always try to put myself in a potential customer’s shoes. The qualities I look for in a software vendor are honesty, attention to detail, focus on usability and outstanding customer service, so that’s what I want to offer at Balsamiq.

Also, buying from a small company seems to be more and more acceptable in the enterprise (perhaps thanks to the recession?). Sharing my good sales figures was part of my efforts to reassure my potential customers that I was going to stay in business long enough to answer their support phone call when needed. Having a straightforward, no-BS company page is part of the same effort.

As for why I’ve stopped sharing as much, the blog post you mentioned has some details. Finding a line has been a struggle. I am always tempted to share everything, but I’ve been pulling back, especially on sharing sales figures, for two reasons: I don’t want to come across as bragging, and most importantly I don’t want anything bad to happen to our employees and our families. It seems so silly to worry about that in 2009, but we live in a country where kidnappings still happen… <insert big shudder here>.

I am still committed to sharing as much as possible, I always try to provide value in all of my output, and I’ve learned so much from other people’s books and blogs (yours included!), sharing what I learn along the way is the least I can do to “give back.” Knowledge is for sharing! :-)

I also really enjoy writing, it helps me organize my thoughts in a way that nothing else can. It’s really helpful.

On press for startups with no cash

Q: Your advice about how a startup can launch and get press should be required reading for any startup. Twelve months later, now that Balsamiq has enjoyed skyrocketing sales and press coverage, how much of this advice would you still give? Have you developed new techniques, e.g. now that Twitter is more mainstream? Have you changed your own behavior (for example spending nothing on AdWords) now that you have extra money to spend on marketing and advertising?

I admit I had to go back and re-read that post, it feels like I wrote it a couple of lifetimes ago. :-)

Let me go down the list:

Regarding “following the advice of the masters”, I think that’s definitely still valid. I always look for people who have been through my current problems before me, first-hand experiences are the most powerful way to learn for me. I am constantly amazed at how much incredibly good information is out there, on any topic. For tech startups especially, there are hundreds of good blogs to follow. Here’s my OPML for instance (more on OPML here).

Regarding “Sending direct emails to bloggers”, I think that’s definitely still valid, although I would keep my expectations low with the big bloggers. Instead, I would really try to narrow the focus of the list of bloggers to write to, making sure that my product is exactly what their readers want to hear about.

Regarding “injecting yourself in the conversation”, I still think it’s valid advice but I have seen people over-doing it, which totally backfires making you look desperate. You should only really add a comment to a post or reply to a Tweet if it’s obvious (and not just to you) that your product is just what the people involved in the conversation need right now. In other words, don’t spam, it shows and it’s ugly. If in doubt, don’t write anything. And when you do, be humble.

As for “using RSS to track keywords relevant to your business”, that’s certainly a valid way to find places to inject yourself in the conversation, but it’s extremely time-consuming. Also, other people’s endorsements are so much more powerful than your own, so as soon as you start seeing other people replying to a blog post or a tweet recommending your product, it’s time to take a step back, enjoy and be thankful. :-)

Regarding my suggestion to use Twitter as a direct-marketing medium (the $$-tweets idea), my thinking has changed on it and I don’t do it any more. Here’s a full post about it.

Regarding giving stuff away, it’s definitely something we love to do every day and are very committed to. I recently calculated that we gave about $680,000 worth of licenses away to do-gooders so far, which I’m proud of.

That means that for every dollar we take in, we donate about 70 cents back to the World. I’d like to see that ratio go to 1-to-1. It’s good for marketing but it’s even better for the soul.

Blogging: I think it’s still essential. One thing you have to decide when you start a company is “which social niche am I going to become a thought-leader in?” — my blog posts about Balsamiq’s growth have brought a huge amount of attention to my company and my product. My post about donating software got me interviewed by a popular magazine. Again, it’s about gaining people’s respect by offering honest and most of all useful tips and ideas. Just like what you’re doing with this blog Jason! :-)

AdWords: I got tricked into signing up for it (Google offered me $50 to start), and now have one ad that has a $200 monthly limit on it. I have looked at the AdWords management and reporting UI perhaps two or three times since joining, I just don’t have time for fiddling with keywords right now. I’m also lucky enough to not be starving for new customers at the moment, so I’m not tempted to up the dollar limit right now. I’m sure it’s helping some, so I won’t lower it either. In short, I have no good advice on this topic.

As for new marketing techniques, I have agreed to sponsor a very good blog on wireframing and this year I sponsored a trade show — both fairly small investments — which I did mostly as learning experiences, I haven’t really tracked down the monetary ROI for them.

In general, I have learned that long-term value (i.e. a solid, useful and usable product, supported by good people who passionately care about their customers’ success) trumps any short-term marketing program. Sure you have to do enough marketing to show you’re a real player, but if your product and company are remarkable on its own getting noticed is a lot easier.

On hiring Employee #1

Q: Four months ago you made one of the biggest decisions of all: You hired your first employee. Were you always planning to hire and grow or did this choice evolve? Did you wait for a certain financial condition before hiring, and if so what was that specifically? You mentioned having “fear and trepidation” alongside your “excitement” — can you elaborate, and do those feelings persist?

I always planned to have employees. My last job at Adobe was Sr. Engineering Lead, meaning that I had a team of 4-5 programmers to manage. Together we built Adobe ConnectNow in record time, with very high quality and had a blast doing it. I remember feeling “man, I’m actually pretty good at this!” I felt very comfortable leading a small and very talented team, sort-of like it was what I was born to do.

So my long-term vision for Balsamiq has always been to run a company of 4-6 people, bringing in maybe $3M/year in revenue. I don’t really know how I came up with that revenue number, so I don’t know how realistic it is, we’ll see.

Before hiring both Marco and Valerie I waited for two things to happen: 1) the sudden, clear-as-day realization that “things cannot continue this way or I’ll run myself and the company into the ground”, and 2) to have enough in the bank to fully cover their first year of salary.

I think the fear and trepidation were due to the fact that I had never had anyone else (other than my wife and son) depend on my daily decisions for their sustenance. It’s definitely a big responsibility, one of those defining moments that separate boys from men (or at least it felt that way).

I still worry about making payroll of course, but we’re lucky enough that our current cash-flow is constantly lengthening our runway to keep us in business for the years to come.

My current worry is to see if it is in fact possible to stay small in the long run… I wonder where “the balance point” is.

On selling stand-alone software versus plug-ins for existing software

Q: Your flagship product Balsamiq Mockups is available both as a stand-alone product and as a plug-in to popular systems like Confluence and FogBugz. Has it been cost-effective to have both the stand-alone and “hang on to coattails” styles of selling? What are the major differences selling stand-alone versus plug-in, in terms of pricing, marketing, and tech support? Is it vital or just a bonus to get support, buy-in, and press from the vendors of the tools you plug into? If you were starting over, would you begin with a plug-in rather than a stand-alone product?

I did start with a plugin product! My initial business plan was to build and sell “a wireframing plugin for Atlassian Confluence”. I was trying to find the smallest, most narrowly focused problem I could solve, and a single plugin for a single Web Office application seemed to be a good place to start, big enough to support me and my family.

My vision has since expanded to building more than one plugin for more than one Web Office platform, and hasn’t changed too much since.

The Desktop version, which is now 80% of where our revenue comes from, was not supposed to be on sale at first. I had build it because one of the problems of Web applications is online/offline usage, and since it was easy for me to port my code to the desktop via Adobe AIR, I did it. I planned to give out the desktop application to plugin customers (which we still do) and that’s it — people had to practically beg me to sell them the Desktop version by itself. I’m glad I listened!

I still believe that “Web Office Plugins” is a good long-term strategy. Riding on the coattails of someone else’s product makes a lot of things easier for a micro-ISV: the sales channel is clear, pricing is easier, the platform vendor needs you to be successful in order to show their customers that their platform is solid and mature, so they’ll demo your product for you, help you with development and marketing… as a one-guy company, I felt that going about it that way was the safest thing to do.

I also really enjoy the coding part of building plugins: making different systems talk to each other has always been fun for me, so I guess it was a good fit.

I think it’s still too early to know if building plugins is a big enough business in the future, but as of today (about 14 months from launch), revenue from plugins have totalled US $212,185, which is not bad for a 3-person company…I am confident sales will increase as more and more people are infected with “the Web Office bug” and start working in the cloud. It might take a couple more years, but I firmly believe it’s one of those “no going-back technologies” (more here). And when the World is ready, we’ll be ready for them.

In the meantime, it’s nice to have the Desktop version to pay the bills.

On a board of advisors

Q: You have credited your board of advisers for contributing to your success. For other companies wanting to assemble a set of advisers, what advice can you give on recruiting them and incentivizing them to spend time with you? Was the board equally important before launch, as you started to grow, and now? Do you feel the board transformed the way you would have otherwise done business or are they less important than, for example, your blog and proactive, personal marketing strategy?

The number one piece of advice I can give is to “do the time”.

Let me explain: most of my advisers are former colleagues whom I worked with in my 7-year career at Macromedia and Adobe. The others are friends we know from living in San Francisco, where everyone is in tech.

They are all people I looked up to in one way or another, people I did great work with in the past and that I know I would have missed once “going solo”. So it’s partially a way to stay in touch with old friends, but very smart and knowledgeable friends!

We don’t have any formal agreement nor do we meet regularly. Mostly I email them whenever I have a question I know they’ll be able to the answer, to or we meet on Skype once in a while (we try to shoot for once a month but somehow haven’t been able to keep a regular schedule with anyone. Things get in the way.) We all got together for a big crab-dinner feast in San Francisco in May, something I hope to turn into a yearly tradition.

It’s pretty informal, but every time I have some sort of contact with one of my advisers, I learn something. Or they say something that gives me an idea, or gets me unstuck. That’s what talking to smart people will do. I always say that one could do a lot worse than trying to be excellent, because “excellence attracts excellence”, and when you’re in that circle, even once in a while, magic happens.

I don’t think the board is any more or less important than the blog… I actually don’t see the connection. It’s ALL important… they’re all pieces of the same big puzzle.

I realize that telling people to go work at a large tech company for 7 years before going solo is not what they want to hear, but it has so many other benefits that I really recommend it.

Thank you for this interview. I look to the point at which I stumbled upon Peldi’s blog last Fall as the moment I truly gained clarity as far as what I really want to do with my life and career. It’s all been downhill (uphill?) from there.

I especially appreciate Peldi revisiting his post about how a startup can launch and get press. Golden. It’s especially nice given that Peldi doesn’t post all that much anymore about behind-the-scenes start-up issues anymore. I understand why that is (only so much time in a day), but I miss it. A remarkable story, regardless. Thanks.

Mike….

Robert

I applaud you for launching the uncommon interview, but Peldi responded to the first question with vanilla, so I did not complete the article.

@Aditya – I talk about it a bit here http://is.gd/3iBsT – in short, I wanted to move closer to my family and I couldn’t afford to not have any salary while living in San Francisco.

@Mike – I’ll try to post more, promise.

@Robert – vanilla? Vanilla??? Which part exactly? :) I pour my heart in the answer and all that comes out is vanilla? I’m depressed now… ;)

david doull

I didnt think the first response was vanilla – no idea what Robert is talking about.I’ve enjoyed Peldi’s blog and have been directly inspired by some of the posts – specifically the one about giving away your product to non-profits.

I’d like to ask Peldi, given that AIR lets you provide download versions for Mac and linux as well as PC – has he found that to be worthwhile – does he get a significant % of Mac users (and any Linux ones)

Hi David, thanks for the kind words. I don’t keep track of the OS used by customers, so the closest approximation I have is the visitors to balsamiq.com: http://skitch.com/balsamiq/b9ph1/osdistribution – being cross-platform is essential in my mind, why would you want to limit your customer base to only one OS, when it’s so easy to go cross-platform these days? :)

Peldi, thanks for sharing the awesome advice. We (Recess Mobile startup) have been using balsamiq religiously for our mockups and it has been compoundingly helpful. Let me know if you could use some help with your adwords and analytics tracking and ROI calculation. I will gladly return the favor to the balsamiq team.

All the best and looking forward to all your future posts!Vitaliy Levit